medium · FRM Part 2 Risk & Investment Management
A fund uses an inverse-volatility weighting for its three-asset portfolio (Equities: σ = 20%, Bonds: σ = 5%, Gold: σ = 10%).
If the correlations between all assets are zero, what are the portfolio weights for 'naive risk parity'?
- Equities: 57.1%; Bonds: 14.3%; Gold: 28.6%.
- Equities: 33.3%; Bonds: 33.3%; Gold: 33.3%.
- Equities: 20%; Bonds: 50%; Gold: 30%.
- Equities: 14.3%; Bonds: 57.1%; Gold: 28.6%.
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